Inside Health

Bush Threatens Veto of Medicare Drug Bill, but a Senator Is Seeking a Middle Ground

By ROBERT PEAR

Published: January 12, 2007

President Bush threatened on Thursday to veto legislation that would require the government to negotiate with pharmaceutical companies to obtain lower drug prices for Medicare beneficiaries.

But chances for passage of some version of the legislation increased when a pivotal figure, the chairman of the Senate Finance Committee, said Congress should repeal a provision of the 2003 Medicare law that prohibits such negotiations.

The chairman, Senator Max Baucus, Democrat of Montana, said he did not favor price controls, but did believe that Medicare should be able to negotiate prices in ''discrete areas where seniors need our help the most.''

House Democrats would go further, requiring the secretary of health and human services to negotiate the prices that may be charged for most drugs covered by Medicare.

The House is scheduled to vote Friday on that proposal. While the Democratic bill is expected to pass, the White House announced the veto threat on Thursday in an effort to hold down the number of votes and to prevent the measure from gaining any more momentum.

''Government interference impedes competition, limits access to lifesaving drugs, reduces convenience for beneficiaries and ultimately increases costs to taxpayers, beneficiaries and all American citizens alike,'' the White House said in a written statement on the House bill.

Mr. Baucus said he was seeking a middle ground between Republicans, who strongly support the existing ban on federal price negotiations, and House Democratic leaders, who want to require the secretary to negotiate.

''The total prohibition on negotiation should be eliminated,'' Mr. Baucus said after listening to two and a half hours of testimony from experts at a Finance Committee hearing. Mr. Baucus is acutely sensitive to public concern about drug prices because he is up for re-election in 2008.

The debate over Medicare drug prices epitomizes the profound differences between the parties over the proper role of government in the nation's health care system. Democrats would prefer that government play a stronger role in guaranteeing access to care at lower prices. Many Republicans, on the other hand, say the market would work better if government got out of the way.

Senator Charles E. Grassley, Republican of Iowa, said the Democratic proposals were ''a stalking horse for price controls.'' In seeking a larger federal role, he said, they remind him of the Clinton administration's ill-fated plan for universal insurance coverage.

''We have enough votes to sustain a veto,'' Mr. Grassley said.

Mr. Baucus and other Senate Democrats said the government should negotiate drug prices in a few, carefully selected areas where competition had not driven down prices.

Senator Olympia J. Snowe, Republican of Maine, said Mr. Baucus's position was highly significant. ''It paves the way for the possibility'' of giving the government the authority to negotiate, she said.

On Wednesday, Ms. Snowe and Senator Ron Wyden, Democrat of Oregon, introduced a bill that would repeal the ban on drug price negotiations. The bill would require Medicare to help negotiate contracts for a drug if the federal government had invested a substantial amount of money in its development.

It would also require Medicare to negotiate contracts when a brand-name drug was available from only one manufacturer and no substitute or ''therapeutic equivalent'' was available.

Mr. Baucus said, ''For certain unique drugs, it seems that the prices are way too high.''

But Richard G. Frank, a professor of health economics at Harvard, said that some of these drugs ''really make a difference in people's lives.'' The drugs may be expensive, Dr. Frank said, but imposing cost controls may pose ''particular risks to precisely the research and development that should be most encouraged.''

The Congressional Research Service said that if the government negotiated lower drug prices for Medicare, pharmaceutical companies might respond by increasing prices for other buyers.

''While drug prices paid by Medicare beneficiaries may fall, overall drug prices may increase for other consumers, specifically for the under-65 population,'' the research agency said.

The White House and drug manufacturers say Medicare is such a large buyer of prescription drugs that it could, in many cases, dictate prices.

Ms. Snowe and Mr. Wyden rejected that argument. Their bill says the secretary cannot set prices or establish a uniform list of covered drugs, known as a formulary.

Representative John D. Dingell, Democrat of Michigan, the chief sponsor of the bill requiring federal price negotiations, said Thursday, ''The purchasing power of more than 40 million Medicare beneficiaries will allow the secretary to achieve lower prescription drug prices.''

But the Congressional Budget Office said the bill would have only ''a negligible effect on federal spending.'' Under the bill, it said, the government could not encourage Medicare beneficiaries to use particular drugs and therefore ''would lack the leverage to obtain significant discounts in negotiations with drug manufacturers.''